Earn What You Spend

I know I’m late to this news, but we’re almost there:

The American economy shed 345,000 jobs in May, and the unemployment rate spiked to 9.4 percent, but the losses were far smaller than anticipated, amplifying hopes of recovery.  Economists described the Labor Department’s monthly jobs report, released Friday, as an unambiguous sign of improvement, yet also clear evidence of broadening national distress, as millions of households grapple with joblessness and lost working hours.

The fact that a report showing the highest unemployment rate in more than a quarter-century was embraced optimistically testified to the stark fears over the economy in recent months.

So we rejoice when the unemployment records are approaching new highs.  NYMag had a great explanation of this: 

There is a term that stock-market veterans use to describe what happens to investors at the bottom of a market: capitulation. The idea is that people eventually tire of trying to understand the market. A series of illogical rallies and devastating crashes robs them of all conviction. Trading volume evaporates. People quit believing they have any clue what’s going to happen next. They give up. And then, gradually, a recovery begins. It’s almost imperceptibly slow because everybody’s too busy mowing their lawns and attending their kids’ piano recitals and otherwise trying to forget they ever heard of the stock market.

Perhaps this idea of capitulation applies to the economy as well. Maybe recovery won’t happen until people like me stop asking “Are we there yet?” Maybe the answer I crave won’t be fully understood for years after the fact, so I should just stop looking.

A good plan, except for this: Capitulation isn’t something you can just decide to do. It’s a process that happens to you. My belief that I can know what the world is going to be like tomorrow has to be wrung out of me, like beads of water from a towel.

If the stock market rallies when BofA announces news that previously would have caused the stock to tank, if we’re happy to see 345,000 jobs lost in a month, then maybe we’re finally approaching capitulation.  There is a lot of negativity already priced into this market.  Maybe it’s time for some optimism.